Five Reasons Startups Often Fail

More and more people are leaving full time employment to follow the dream of being their own boss. No more answering to an ungrateful and overbearing manager, no more bowing down to protocol or wading through bureaucratic red tape. Freedom to call the shots for yourself, doing things the right way. A chance to achieve your ideal work/life balance and feed your own personal wealth, rather than slaving away for shareholders who will always demand more.

It’s an understandable dream, an achievable dream and one that could be completely life changing. Whether for better or worse depends on a number of key factors but the odds of success are certainly against would be entrepreneurs. Some stats show the failure rate to be around 50% whilst more pessimistic observers such as Forbes have the rate closer to 90%.

For any new entrepreneur, it’s essential to have a dose of reality on the risks and threats involved. Being wise to them and prepared could mean the difference between success and failure. Even established businesses will face these threats if they fail to move and adapt with the times. We’ve highlighted the five biggest threats that start up businesses face:

No Demand

It sounds so obvious but you would be surprised. Entrepreneurs surveyed by TAB identified this as the biggest threat with 37% of entrepreneurs citing it as the reason behind their failure. A business only exists because of its customers, without them there is no business. In the Costa Del Sol signs are showing that there is no shortage of customers thanks to the continued influx of euros from tourism.

Reports in for 2015 showed a record 11.5 billion euros being spent, indicating a growing economy that shows no signs of slowing down. Choosing an economically viable location for your business is vital, yet if the product or service fails to hit the mark then the business has no chance. To drill into the no demand issue further, Fortune identified lack of need this as the number one reason start ups fail, with nearly half of entrepreneurs claiming this was the real reason behind their failure.

As the late Steve Jobs said: “People don’t know what they want until you show it to them.”

To show them you need to have a presence through marketing. Being the best online marketing company in Marbella means we know all about this. We are well and truly in a digital age and having an online presence and being seen is paramount to business success.

Poor Marketing

This relates directly to demand – you will need marketing to create demand. The mistake people often make is that they settle for their own amateur marketing efforts when the success of their business is at stake. As the owner of a new start up, you will already be spread very thinly; usually you’re required to do all the jobs of all the staff you’re yet to employ. To be an expert in what you’re doing and an expert in marketing is a rarity.

Even if you have marketing experience, the digital world moves so quickly that keeping up with it is a job in itself. Essentially it’s time you don’t have. Time that could spent on running your business, getting your product right and perfecting your customer relationship.

The beauty of today’s digital marketing age is that everything is trackable and so you can quickly optimise your spend. Optimasit provides dedicated hosting in Marbella and we understand the importance of aligning your website with your online marketing efforts. As a one stop shop, Optimasit can ensure an integrated approach, which will save any new business money and time… which brings us to our next threat:

Cash flow

Insufficient funds and/or poor cash flow management will cripple any new business. Properly planning the capital required in your business plan can help, but there’s no easy answer to this problem, as the variables by which it can occur are huge. To simplify it, however, you either ensure what’s coming in exceeds what is going out, or you work with a business angel, investor or mentor that can give your business a cash injection.

A cash injection of capital will usually go on product development or marketing as any investment will expect a return. And to get that return you must create demand, a business that doesn’t grow will shrink.

Increased Competition

The dream we mentioned in our opening gambit is one that many people are prepared to chase. Competition is therefore always strong in high growth sectors. Standing out from the crowd must be your number one priority. Without an online marketing strategy this is near impossible to do. Even if your product or service isn’t physically sold online, 93% of your customer base and rising will be searching there.

Poor Infrastructure

Your product is right, you’ve got your marketing rolling and demand is coming in, yet your website and your staff are unable to cope with this newfound demand. Being unable to cope with demand due to poor infrastructure is perhaps the most heartbreaking reason for a business to fail.

An oversight of this kind can see all your investment and hard work turn to dust in a very short space of time. Having an IT system under the same banner as your marketing strategy will avoid this issue completely. Optimasit’s website hosting in Marbella combined with our online marketing services provides the consistency and communication a new business needs to survive.

Having everything under one roof means you can budget it all into a monthly retainer and manage it month by month. This gives any business the advantage of ensuring cash flow is taken care of whilst the marketing is firing on all cylinders to create demand.If you’d like to talk further about how Optimasit can help your business grow, then please get in touch for a no obligation chat.